The United States Supreme Court has held that a method for hedging risk is not patentable because it is a mere ‘abstract idea’. The decision confirms that abstract ideas are not patentable, but provides limited additional guidance on how to determine whether or not an invention is an abstract idea.
The claims before the Supreme Court were directed to managing risk by a method involving the initiation of a series of transactions. The method was described as being suited to the field of energy supply. The reasoning as to why the claims defined an unpatentable abstract idea varied between the Supreme Court justices.
The court held that the more restrictive ‘machine-or-transformation’ test of evaluating whether an invention is a machine, or if the invention transforms an article into another state or thing, is ‘a useful and important clue’ but is not the sole test for patentability. A majority of the court also held that there was no across-the-board exclusion to patentability for business methods. The decision therefore does not categorically exclude all patents for business methods.
The Australian approach also excludes abstract ideas from patentability. In finding a method for protecting assets not patentable, the Australian Federal Court held that ‘a mere scheme, an abstract idea, mere intellectual information’ is not patentable. The Federal Court may therefore have reached the same conclusion as the United States Supreme Court if it considered the same patent claims. It appears to be common ground between the two countries that a claim defining a method that only affects the legal or commercial interests of entities is not patentable.
A potential outstanding question of importance in Australia is in the field of computerised business systems. In particular, what is the status of methods that would be viewed as abstract ideas, but are limited to implementation in a computer, so that the effect of the invention is a change in information in the computer? These inventions are generally viewed as patentable in Australia at present and the United States Supreme Court decision alone is unlikely to affect this.
However, should an appropriate case come before the Australian courts, the United States Supreme Court decision potentially re-agitates the question of patentability of computerised business systems in two ways.
First, the Australian Federal Court has previously found that a new business system implemented using known smart cards was patentable. In making this finding, the court stated that it found the United States State Street Bank decision persuasive. The State Street Bank decision dealt with an invention for managing investments. However, the United States Supreme Court has now rejected the test for patentability put forward in this decision. It did this without indicating whether or not it agreed with the outcome of the State Street Bank decision.
Second, several of the justices of the Supreme Court favoured an approach that abstract ideas do not become patentable by adding a limitation ‘to one field of use’ or ‘adding token postsolution components’. No Australian decision has yet to consider whether this approach applies in Australia.
Despite these potential arguments, we can expect to continue to see patents granted in Australia for business methods in the foreseeable future, at least when the method is implemented using a computer.
This article was written by Carl Harrap, Senior Associate, Sydney.
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